1. Field of Invention
This invention relates to recovery of outstanding governmental tax revenues in lien status, specifically a new and previously unused method of such recovery.
2. Prior Art
Every year in the United States, countless real property transactions, of a residential, commercial or other nature, open and close escrow, resulting in the sale, refinance or transfer of such real property. At every such closing, handled by any legally authorized settlement or escrow agent such as title insurance companies, attorneys at law, and other such authorized parties, hereinafter referred to as settlement agents, all liens against the subject property, including tax liens, are settled. Specifically, lienholders against such subject property are paid and title is thus cleared as to the subject property, at which time the property is now refinanced or transferred. With respect to tax liens, be they federal, state or local, or any combination thereof, if such a lien existed against the subject property or its owner of record, said lien would of course be satisfied at subject close of escrow, resulting in the taxing authorities recovering taxes due, as appropriate.
From a tax revenue recovery perspective, a very real shortcoming exists with the above process, which is and continues to be standard procedure in the United States with respect to real property transactions of a residential, commercial or other nature. Specifically, the current process omits entirely a very substantial tax lien recovery mechanism which would immediately assist federal, state or local tax revenue recovery efforts, or any combination thereof, in situations where a federal, state or local tax lien, or any combination thereof, exists not against the subject property in escrow or its owner, but rather against a lienholder on the subject property.
Specifically, there are indeed instances involving real property transactions where federal, state or local governmental taxing authorities, or any combination thereof, are due taxes by certain parties who are other than the property owner of record. These outstanding tax obligations are in fact in lien status but are currently undetectable, and therefore uncollectable, to said governmental taxing authorities as a result of said real property being owned by another party, which third party has no real property ownership relationship, such as a community property interest, a joint tenancy interest, a tenancy in common interest, or any other ownership interest, with the party who in fact owes such outstanding tax lien. For example, there are instances where a party against whom a governmental tax lien exists in turn places a lien, such as a judgment lien, a personal note, or some other type of lien against the real property of another party, which third party, as indicated above, has no real property ownership relationship with the party who in fact owes such outstanding tax lien. However, the party owing the tax lien, as a lienholder on the subject property in transaction status, then collects on said lien, with interest, when subject real property is refinanced or transferred at close of escrow. While the governmental taxing authorities possess the necessary legal authority to intercept such monies at close of escrow in lieu of the subject lienholder, under the current real property escrow process in the United States, no process exists or is utilized for checking the status of such lienholders. Indeed, settlement agents currently check and investigate title and status solely on the subject property, and any liens attaching thereto, and not the status of any party, as described above, who is other than a regulated financial institution or entity claiming a lien on said property. As a result, such undetectable tax revenues in lien status as articulated above could be recovered but in fact are not under the current limited escrow process. It is therefore estimated that the tax revenues in lien status lost on an annual basis, to the United States Treasury alone, could total as much as tens of millions, to perhaps billions, of dollars.
Further, in the described real property transactions, as indicated, such lienholders are paid by the settlement agents at close of escrow to satisfy the liens they have against the subject real property. These payments, however, are not reported to the Internal Revenue Service, and possibly not to state or local governmental taxing authorities as well, due to the $10,000, an occasionally lower, reporting threshold. Even in cases of tax liens greater than $10,000, such escrow payments to said lienholders, if they are in fact ever reported, are reported in the year following the payment, not at close of escrow when such lienholders receive payment. Therefore, such lienholders, and not the federal, state or local taxing authorities, or any combination thereof, receive this money, even though if a governmental tax lien exists against such a lienholder, this money legally belongs to that governmental taxing authority, and not the lienholder. This is lost revenue to the federal, state or local taxing authorities, or any combination thereof, and it need not be. Thus, the shortcomings and disadvantages of the prior art real property escrow process include the following:                (a) The current process limits entirely its lien searches to the subject property and that property's owner through the standard and well known title search, which reveals all liens and encumbrances as to that property and its owner only.        (b) As a result of such limited and incomplete lien searches involving real property in transaction status, such as a refinance or sale, governmental tax revenues legally collectable yet undetectable due to ownership of the involved real property in the name of a party who is other than the party owing the governmental tax lien and which party has no real property ownership relationship, as described above, with the party owing the outstanding tax lien, are not recovered at close of escrow when funds are disbursed. This results in substantial revenues in the form of outstanding tax liens lost on an annual basis to federal, state or local taxing authorities, or any combination thereof.        